Seniors lobby challenges health insurance report

October 12, 2009 at 5:46 PM CDT - Updated June 20 at 3:35 AM

Senate Finance Committee Chairman Sen. Max Baucus, D-Mont

By RICARDO ALONSO-ZALDIVAR and ERICA WERNER, Associated Press Writer

WASHINGTON - Supporters of President Barack Obama's drive to remake health care are pushing back against a dire report from the insurance industry warning of hefty new costs for consumers from the latest legislation.

The study commissioned by America's Health Insurance Plans put the White House, congressional Democrats and their allies on the defensive on the eve of a critical vote in the Senate Finance Committee.

It marked a shift in strategy by the health insurance industry, which had been working for months behind the scenes to help shape health care legislation. With the Finance Committee set to vote Tuesday on a sweeping bill the industry fears could result in a loss of revenue, the insurers suddenly went on the attack, in dramatic fashion.

Late Sunday, AHIP sent reporters and its member companies a new accounting firm study that projects the legislation would add $1,700 a year to the cost of family coverage in 2013, when most of the major provisions in the bill would be in effect.

Premiums for a single person would go up by $600 more than would be the case without the legislation, the PricewaterhouseCoopers analysis concluded in the study commissioned by the insurance group.

"Several major provisions in the current legislative proposal will cause health care costs to increase far faster and higher than they would under the current system," Karen Ignagni, the top industry lobbyist in Washington, wrote in a memo to insurance company CEOs.

The industry said the cost increases result from new taxes and a weakening of the penalties for failing to get insurance that would let Americans postpone getting coverage until they get sick.

Democrats and their allies criticized the report as biased. Health economist Len Nichols of the New America Foundation contended that, among other problems, the study failed to take into account the impact of subsidies that would help low- and middle-income people buy coverage. He said it also left out a key expected impact of a proposed new tax on high-value insurance plans, which is a reduction in the use of health services.

"It was paid for by people who are not interested in an objective analysis of the truth but are interested in a particular point of view being inserted into the political process right now," Nichols said.

Spokesmen for the White House and for Finance Committee Chairman Max Baucus, D-Mont., attacked the report along similar lines. "It's a health insurance company hatchet job, plain and simple," said Baucus spokesman Scott Mulhauser.

The Senate Finance Committee is slated to vote on its 10-year, $829 billion bill on Tuesday, but more important to the industry are the steps beyond the panel's decision.

Senate Majority Leader Harry Reid, D-Nev., will be merging the bill with a companion measure from the Senate Health, Education, Labor and Pensions Committee, with the goal of a sweeping, affordable bill. In the House, Speaker Nancy Pelosi, D-Calif., and Democratic leaders have been pulling together legislation from three committees.

Unlike the 1990s, when it contributed to the failure of President Bill Clinton's health overhaul, the insurance industry has been attracted by the promise of millions of more people getting coverage. Translation: millions of new consumers buying policies.

The Baucus plan got a boost last week when the Congressional Budget Office estimated it would cover 94 percent of eligible Americans while reducing the federal deficit.

But the PricewaterhouseCoopers analysis attempted to get at a different issue - costs for privately insured individuals.

It concluded that a combination of factors in the bill - and decisions by lawmakers as they amended it - would raise costs.

The chief reason, said the report, is a decision by lawmakers to weaken proposed penalties for failing to get health insurance. The bill would require insurers to take all applicants, doing away with denials for pre-existing health problems. In return, all Americans would be required to carry coverage, either through an employer or a government program, or by buying it themselves.

But the CBO estimated that even with new federal subsidies, some 17 million Americans would still be unable to afford health insurance. Faced with that affordability problem, senators opted to ease the fines for going without coverage from the levels Baucus originally proposed. The industry says that will only let people postpone getting coverage until they get sick.

But the industry stopped short of signaling all-out opposition. "We will continue to work with policymakers in support of workable bipartisan reform," Ignagni said in her memo.